INTRODUCTION

The digital economy is growing at a rapid rate. As of 2016, the digital economy was worth an estimated 11.5 trillion dollars worldwide, equivalent to 15.5 per cent of the global GDP.[1] According to McKinsey, the African digital economy is expected to grow to about $300bn by 2025.[2] The major players in the digital economy are multinational enterprises (MNEs), otherwise known as “tech giants” that deploy technologically advanced tools and adopt sophisticated operational models that enable them to operate across several jurisdictions with limited or no physical presence. Limited or no physical presence means their business activities will not create any form of permanent establishment or fixed base. This has greatly inhibited the taxing rights of countries in which they operate. According to the Organization for Economic Co-operation and Development (OECD), the effective cost or losses occasioned by tax avoidance mechanisms deployed by MNEs ranges from US$ 100 billion to US$240 billion as of the year 2015.[3] The need to avert economic inequalities, unfair competitive environment and tax revenue losses brought about the necessity for a legal framework for taxing businesses operating in the digital economy. This has intensified the need for international taxation rules that fairly allocate taxing rights amongst states for cross-border transactions that generate income from different jurisdictions, while also eliminating double taxation and non-taxation. This piece evaluates the current global approach towards allocating taxing rights to the income generated in the digital economy and the unilateral approach to taxation of the digital economy adopted by the Nigerian government.

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